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LasVegasSandsCorpLVS
Q12010EarningsCallTranscript
Executives
DanielBriggs:IR
KennethJ.Kay:SVPandCFO
RobertG.Goldstein:EVPandPresident,TheVenetianandPalazzoLasVegas
MichaelA.Leven:PresidentandCOO
SheldonG.Adelson:ChairmanandCEO
Analysts
LarryKlatzkin:
MarkStrawn:MorganStanley
ShaunKelley:BankofAmericaSecuritiesMerrillLynch
RobinFarley:UBS
JoeGreff:JPMorgan
JanetBrashear:SanfordC.Bernstein
FeliciaHendrix:BarclaysCapital
TranscriptCallDate05/06/2010
Operator:Goodafternoon.MynameisTanekaandIwillbeyourconference
operatortoday.Atthistime,IwouldliketowelcomeeveryonetotheLasVegas
SandsCorp.Q1EarningsConferenceCall.Alllineshavebeenplacedonmuteto
preventanybackgroundnoise.Afterthespeakersremarks,therewillbea
questionandanswersession.(OperatorInstructions).
Thankyou.IwouldnowliketoturnthecallovertoMr.DanielBriggs,Vice
PresidentofInvestorRelations.Pleasegoahead,sir.
DanielBriggsIR:Thankyou,operator,andgoodafternoon,everyone.Thankyou
forjoiningustodayonthecall.WithmetodayareMr.SheldonG.Adelson,our
ChairmanandChiefExecutiveOfficerMikeLeven,ourPresidentandChief
OperatingOfficerRobGoldstein,ExecutiveVicePresidentandPresidentofThe
VenetianandThePalazzoLasVegasKenKay,ourChiefFinancialOfficerand
GayleHyman,ourGeneralCounsel.
Beforewebegin,letmeremindyouthattodaysconferencecallwillcontain
forwardlookingstatementsthatwearemakingunderthesafeharborprovisionsof
federalsecuritieslaws.TheCompanysactualresultscoulddiffermateriallyfrom
theanticipatedresultsinthoseforwardlookingstatements.Pleaseseetodays
pressreleaseunderthecaptionForwardLookingStatementsforadiscussionof
risksthatmayaffectourresults.
Inaddition,wemaydiscussadjustednetincome,adjusteddilutedEPSandadjusted
propertyEBITDA,whicharenonGAAPmeasures.Adefinitionandareconciliation
ofeachofthesemeasurestothemostcomparableGAAPfinancialmeasuresare
includedinthepressrelease.Pleasenotethatthepresentationisbeingrecorded.
Withthat,IllturnthecallovertoMr.Adelson.
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SheldonG.AdelsonChairmanandCEO:Thanks,Dan.Goodafternoonandthank
youallforjoiningustoday.Illbeginthecalltodaywithsomebigpicturethoughts
onthisquartersresultsandthepreviewopeningofMarinaBaySandsin
Singapore.IllthenhandthecallovertoMikeandtheteamtoprovidesome
additionaldetail.
Bigpicture.Wearequitepleasedwithourresults.Ourbusinessisdoingverywell
atthemoment,eachofourpropertiesisgrowingrevenue,operatingefficientlyand
expandingEBITDAmargins.ThestrengthofourbusinessmodelinMacauremains
ondisplayinourquarterlyresults.Weagaingeneratedrecordrevenuesand
EBITDAinthequarterandcontinuetoleadthemassmarketinEBITDAgeneration.
WhiletotalnetrevenueatourthreepropertiesinMacauincreased24%compared
tolastyearsfirstquarter,adjustedpropertyEBITDAincreased47%acrossour
portfolioofthepropertiesinMacau.Itjustvalidateswhatwevebeensayingthat
somebodyoncetoldme,youcantputrevenueinthebank,onlyEBITDAgoesin
thebank.
AtTheVenetianMacao,EBITDAforthequarterwas$170million,anincreaseof
40%comparedtolastyearsfirstquarter.EBITDAmarginincreasedtoaquarterly
record30.9%.Thatfinancialperformancereflectsstrongrevenuegrowthcoupled
withourcontinuedfocusonefficiencythroughoutouroperations.
TheresultsoftheSandsMacaoandFourSeasonsHotelMacaoandPlazaCasino
alsoreflectthesetrends.Revenueisup26%atSandsMacaoforthequarter,while
EBITDAwasup38%.AttheFourSeasonsHotelMacaoandPlazaCasino,revenues
wereup118%forthequarter,whileEBITDAwasup343%.
Focusonthehighlyprofitablemassgaminghotelandretailbusinessestogether
withourattentionatcoststructureandefficiencyhasallowedustobringrecord
revenuedollarsthroughtotheEBITDAline.Wewillrecommenceconstruction
shortlyonParcels5&6,whichisourlargestCotaiStripdevelopmenttoday.We
believethat13.3millionsquarefootintegratedresortcomplexwithitsarrayof
worldclassattractionandamenitieswillbroadlyappealinMacauasan
internationaltourismdestination.
Importantly,thedevelopmentwillmorethandoublethehotelinventoryonthe
CotaiStrip.ThathotelinventoryiscriticaltoincreasethecompetitivenessofMacau
asanInternationalMICEDestinationandenhancingretailgrowth.ImightsaythatI
believethereareseveralthousandemployeesalreadyonthesitethataredoing
someremediationworkandthatmayhavealreadystartedsomeoftheminor
reconstructionworks.
LetmespendamomentonLasVegas.Revenuesincreasedmodestlythisquarter
comparedtothequarteroneyearago,dueprincipallytorecordvolumesinthe
gamingportionofourbusiness.Groupbusinessisalsoreturning,althoughpricing
remainscompetitive.Forwardbookingsareincreasingforboth2010and11,which
isencouraging.WearealsoseeingstrongerpricingtrendsintheFITportionofour
business,particularlyonweekends.
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Finally,letmetouchonthenewestandmostexcitingpropertyinourportfolio,
MarinaBaySandsinSingapore.Afteryearsofhardworkandpreparation,we
openedthedoorsofMarinaBaySandsonApril26,just10daysago.Whileit
remainsearlydays,theinitialresultsareextremelypromising.Visitationand
gamingplaylevelshavebeenrobust.Wehostedourfirstgroupmeetingearlier
thisweekandwillhostasecondmajorgroupnextweek.Forwardbookingtrends,
whichwerealreadyquitehealthy,haveincreasedmarkedlysinceweopenedthat
door.
LetmeprovideafewearlyobservationsonMarinaBaySandsthatwevelearned
sinceweopened.One,wehaveasubstantiallydifferentcustomerprofilethanour
competitor,whichshouldleadtoahighrevenuepervisitor.Two,thedepartmental
profitfromgaminghasrangedbetween45%and60%dependingonthevolumeof
playperday.Thisiswhatwehavebeensayingforquitesometimeandothers
haventagreedwithit.
Three,directVIPplayhasbeenrobusttodatewithover450creditapplications
completedinthefirstweek.CustomershavecomeprincipallyfromMalaysia,
IndonesiaandSingapore,whichwevealwaysmaintainedhasbeenourprimary
market,withadditionalcustomersfromTaiwan,MainlandChina,HongKong,the
MiddleEastandIndia.
Four,bothourpremiumdirectandslotplayhavebeenquiterobustandhave
exceededourexpectations.Five,todatevisitationhasbeenmostlyfromoverseas
visitorswithamuchsmallercomponentcomingfromSingaporeans.
Sixth,wearelearningrapidlyaboutourcustomertasteandwehavesignificant
opportunitiestoreconfigureourgamingfloor,aswellasminimumwagesand
gamemixtodeliverthemostpopulargamesbasedoncustomerdemandinthe
future,particularlyontheETG,theelectronictablegameside.Webelievethatcan
somewhatincreaseouraveragewinpergameperdayontheslots.
Weareconfidentaboutthepropertyspotentialtogeneratebothsignificantgrowth
andstrongreturnsfortheCompany,whileincreasingvisitationtoSingaporeand
enhancingitsreputationastheleadinginternationalbusinessintourism
destination.WelookforwardtoformerlycelebratingthedebutofMarinaBaySands
withthepeopleofSingaporeandagrandopeningcelebrationonJune23.
Ilookforwardtoaddressingyourquestionslater,butIllturnitovertotheteam
foraquickupdatefirst.Mike,youareon.
MichaelA.LevenPresidentandCOO:Thankyou,Sheldon.Illaddjustacouple
ofthoughts.Weveworkedhardtoinstillacultureofclassdisciplineacrossthe
Companyandexpectthatfocustobeanongoingcomponentofourfuturesuccess.
Now,ourprincipalfocushasturnedtoopportunitiesforgrowth,whichwebelieve
tobesignificant.
InMacau,wehaveoutstandingorganicgrowthopportunitiesinthegaming,hotel,
MICEandretailareas.WewillalsosignificantlyexpandourassetbaseinMacau
withthedebutofParcels5&6ontheCotaiStrip.
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InLasVegas,ourrecoveryofconsumerspendingandaneventualrecoveryin
roomrateswilloccurovertime.AtSandsBethlehem,theadditionoftablegames
thissummerandour300roomhotelinthespringof2011aswellastheexpansion
andmaturationofourregionalmarketingprogramswillbenefitthatproperty.And
ofcourse,MarinaBaySandsshouldprovidesubstantialgrowthinthecoming
quarters.
TheVenetianMacauremainsthemarketleaderinmassplayinMacau,delivering
nonrollingdropof$922millionandrecordslothandleof$670millionforthe
quarter.ThetrendofhighholdatTheVenetianMacauonnonrollingplaycontinued
lastquarterandalsooccurredinApril.Webelievethesehigherholdratesatthe
VenetianMacauonnonrollingplay,whichareimpactedbymanyfactors,including
thelengthofplay,thecustomerprofileandthemixofgamesonTheVenetian
floor,shouldcontinueintheforeseeablefuture.
OurcontributiontoEBITDAatTheVenetianMacaucontinuestoreflectthat
strategy.ForeverydollarofEBITDAgeneratedatthepropertyduringthequarter,
nearly60%wasproducedbylessvolatilehighermarginmassgamingandslot
play.Over25%wasgeneratedfromnongamingareas,includingourhotel
conventionbanquetandretailoperations,andlessthan15%wascontributedby
themorevariablelowermarginVIProllingplaysegment.
Weremainfocusedondevelopingandgrowingourpremiumdirectbusiness,which
isthehighermarginsegmentofVIPplay.OurdirectVIPplayatTheVenetian
Macaugrewto$2.1billionorapproximately21%ofthemorethan$10billionof
rollingvolumeduringthequarter.AttheFourSeasonsHotelMacaoandPlaza
Casinototalrollingvolumewas$3.7billionwithdirectVIProllingbusinessgrowing
to$1.6billionor43%ofthattotal.
Lookingaheadweremainedconfidentthatthedevelopmentofadditional
destinationsontheCotaiStripwillexpandthemarket,drivinggreatermassplay,
hotelandretailrevenuestoourcurrentandfutureprofits.
LetmespendamomentontheSandsMacao.TheSandsremainsbothacashcow
andamarketleaderinmassplayontheMacauPeninsula.EBITDAincreased38%
to$70millionforthequarter.EBITDAmarginimprovedto24.6%thisquarter
comparedto22.4%inlastyearsfirstquarter.SothatcoversMacau.
LetmespendaminuteofSandsBethlehem,beforeRodcoversLasVegas.Iam
pleasedtosharetheSandsBethlehemhaditsbestquartersinceweopenedthe
propertylastsummer,generating$11millionofEBITDA,theimprovingresults
reflectstrongerslotrevenues,theintroductionofadditionalmarketingprograms
andinconcertwithourefficiencyeffortthatwasjustcompleted.
WecontinuetobelieveSandsBethlehemhaspotential.Weplantoadd89table
gamesthissummer,whichshouldincreasethepropertiesappealandshould
contributetogreaterprofitabilityofthepropertyoverall.Wehavealsorestarted
theconstructionofour300roomhotel,whichisexpectedtoopeninthespringof
2011.TheadditionofthehotelwillincreasethelengthofstayatSandsBethlehem,
whileaddinghighermarginhotelrevenuestothepropertysfinancialresults.
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Withthat,letsgotoRobandLasVegas.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Thanks,Mike.OurLasVegaspropertydeliveredEBITDAof$105millionin
thefirstquarterof2010comparedto$90millioninthefirstquarteroflastyear.
Thegamingsegmentofourbusinessremainsstrong.Hoteloccupancyalsoremains
healthy.Thechallengecontinuedtoberoomrates,whichremainweakercompared
tohistoricallevels,althoughFITrateshaveshownimprovement,particularlyon
weekend.
Foodandbeveragebusinessisalsodowncomparedtolevelsweenjoyedinthe
past.Tablegamedropwasarecord$547millionduringthequarter,a23%
increaseinthefirstquarterof2009,whileslotonewas$49millionduringthe
quarter,aboutthesameasitwasinthe2009firstquarter.
Lookingforward,weexpecttorealizemoregrouproomsin2010thanrealizedin
2009.Thepaceofgroupbusinessbookingscontinuestoimprove.2011shouldbe
strongerthan10.In2009,werealizedapproximately478,000grouproomnights
orabout18%ofourtotalroomnights.Today,wehaveabout515,000grouprooms
onthebooksfor2010.Weexpectouractualgrouproomstoexceedthatnumber
asweaddadditionalbusinessthroughouttheremainderoftheyear.
Wedoexpectthatpricingwillimproveovertimeasbusinessexpands,our
competitorsinLasVegaswillraisepricesandtheeconomicrecoverycontinues.
So,insummary,ourgamingbusinessishealthywithrecordvolumesinourmost
recentquarter,whileourcostwasdown.Giventhatbackdrop,weareconfident
thatLasVegaspropertieswillcontinuetoexhibitsignificantoperatingleverageas
priceintheFITandgroupsegmentsimprove.
Andwiththat,IllturnthecallovertoKen.
KennethJ.KaySVPandCFO:ThanksRob.Wemadesteadyprogressthis
quarteronourdeleveragingstrategy.Excludingourdevelopmentfinancingin
Singapore,wepaiddownorretiredapproximately$850millionofourdebtduring
thequarter.Thoserepaymentsincludethetotaloutstandingbalanceof$776million
ontherevolvingportionofourdomesticcreditfacility.
Repaymentsalsoincludethepurchaseandretirementofapproximately$35million
offacedvalueofourseniornotes,whichwerepurchasedatadiscount.These
repaymentswillreduceourcashinterestexpensebymorethan$25millionper
yearinthefuture.
AsofMarch31,wehadinexcessof$4.2billionofcash,cashequivalentsand
shortterminvestmentsonourbalancesheet.Thatcashprovidesuswithsignificant
financialflexibilityandwillenableustoexecuteadditionalcomponentsofourde
leveragingstrategyinthefuture.
InadditiontoourcashbalancesatMarch31,wehaveapproximately$1.3billionof
availabilityunderourundrawncreditfacilitiesatcurrentexchangerates,including
amountsavailablethroughourU.S.creditfacilityandourSingaporecreditfacility.
Sotogether,wehaveapproximately$5.5billionofcash,cashequivalentsand
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shortterminvestmentsandavailablesourcesofliquidity.
Theprincipalusagesforthat$5.5billionincludesapproximately$1.4billionof
capitalexpenditures,preopening,FF&Eandconstructionperiodinteresttospend
onourMarinaBaySandsdevelopmentinSingaporethroughtheendofcalendar
2010,althoughweexpectasmuchas$400millionofthatamounttobepaidoutof
cashflowgeneratedbyMarinaBaySandsduringtheyear.Anadditional$400
million,principallyretainagepaymentsonthedevelopmentwillbepaidoutofcash
flowfromthecompletedpropertyin2011.Approximately$400millioninadditional
equitycontributionswillbemadetowardsthedevelopmentofParcels5&6onthe
CotaiStripinMacau.
Inaddition,weexpecttocloselaterthismonththepreviouslyannounced$1.75
billioncreditfacilitytofundconstructionofParcels5&6inMacau.The$400
millioninequityandtheprojectfinancingtogetheraresufficienttocompletethe
firsttwophasesofthatdevelopment,whichwillfeatureapproximately6,000hotel
roomsandallofthemajorcashflowgeneratingcomponentsofthedevelopment.
AsofMarch31,totaldebtwas$10.5billion,whileourcostofborrowingremains
low.Ourweightedaverageinterestrateforthequarterwasapproximately3.5%.
Atourcurrentlevelsofoperatingperformance,ourcashbalancesprovideample
cushionforcompliancewiththefinancialcovenantsinourdomesticcreditfacility.
AtMarch31,2010fortheU.S.restrictedgroupcovenantcompliancepurposesour
trailing12monthEBITDAwas$439millionourtotalgrossdomesticdebtwas$4.3
billion,ourcashbalanceswithintheU.S.restrictedgroupwere$2billionandour
calculatednetdebtwas$2.4billion.Ourleverageratiowas5.4timescomparedto
amaximumleveragecovenantunderourU.S.creditfacilityof6times.
ForTheVenetianMacaorestrictedgroup,atMarch31,2010,ourtrailing12month
EBITDAforcompliancepurposeswas$1billion,totalgrossdebtatTheVenetian
Macaorestrictedgroupwas$2.6billionandourleverageratiowas2.6times
comparedtoamaximumleveragecovenantof4times.
Weremainfocusedonmaximizingoperatingprofitabilitytoenabledebtreduction.
Whileourbusinesswillnaturallygenerateasignificantamountoffreecashflow
thatwillenabledeleveraginginthefuture,wealsoexpecttoexecuteindue
coursethesaleofnoncoreassets,whichwillenableadditionaldebtrepayments
andenhancedreturns.
BeforeIturnthecallovertoSheldonforconcludingcomments,letmehighlight
twochangeswearemakingthisquarterwithrespecttoourexpectationsfortable
gameshold.Forrollingplay,weareestablishingarangeof2.7%to3%acrossour
portfolioofproperties,whichisconsistentwiththeactualholdratewehave
experiencedoverthelastfewyears.
Fornonrollingplay,ourrangeofexpectationforholdrateshashistoricallybeen
18%to20%inMacaoand20%to22%inLasVegas.Wedonotbelievethese
rangesaccuratelyreflectourevolvingnonrollingcablegamesbusinessineither
LasVegasorMacau.
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OurnonrollingtablegamesholdratesinbothLasVegasandMacauareimpacted
bymanyfactors,includingthelengthofplay,thecustomerprofile,themixof
gamesandseasonality.Thesefactorsacrossvarywidelyacrossourportfolioof
propertiesandareconstantlychanging.Giventhatbackdropandourbeliefthata
onesizefitsallholdexpectationcannotaccuratelycapturethesefactorsacrossour
portfolioofproperties,wehavechosentomovetoapropertyspecificfourquarter
movingaveragemethodologyfornonrollingtablegamestoholdexpectations.We
believethismethodologyisareasonableonethatwillalloweachproperties
expectedfullpercentagetoreflectthatpropertiesuniquecharacteristicsand
expectedholdperformanceasdeterminedbyactualhistoricalexperience.
Andwiththat,IllturnthecallbackovertoSheldon.
SheldonG.AdelsonChairmanandCEO:Thanks,Ken.FirstthingIwanttosay
isthatImadeanerrorbefore.Itwasatypoinourdraft.Isaidthatweopenedon
April26.WeactuallyopenedonApril27.IshouldhaveknownIwasthere.
BeforewegotoQ&A,letmemakeacoupleoffinalpoints.Weworkedvery
aggressivelylastyeartorightsizeourcoststructureandtocleanupourbalance
sheet.Iknowwevemadealotofthatinseveralpriorconferencecalls,soIam
veryhappytosaythatthatsbeensubstantiallycompleted.
Theresultsofthoseeffortsarenowclear.Wejustcompletedanotheroutstanding
quartergeneratingrecordrevenuesandEBITDA.Wehavesignificantlyreducedour
debtlevelsandourbalancesheetnowismorethan$4.2billionofcash,providing
significantfinancialflexibilityandenablingustocontinueourindustryleading
growthstrategy.Westandtodayatthebeginningofournextmajorphaseof
growth.
Withthat,wellmovetoyourquestions.
TranscriptCallDate05/06/2010
Operator:JoeGreff,(JPMorgan).
JoeGreffJPMorgan:Iwashopingthatyoucangiveusanupdateonany
conversationsorthemanyconversationsImsureyouhavehadwithMacauand/or
BeijingwithrespecttothetablegamecapfornewdevelopmentinMacau.Ithink,
Ken,youphrasedwhenyouweretalkingaboutsites5&6ishaving6,000rooms
andallthecashflowgeneratingamenities,canyoucommentonhowmanytable
gamesyouareallowedrightnowtohavethere,whatyouareanticipatingtoend
upthere,andwhetherthatwouldinvolvetablegamesbeingbroughtoverfrom
someofyourexistingproperties,whetheritstheFourSeasonsorVenetianMacau?
MichaelA.LevenPresidentandCOO:Wemetlastweekwiththemembersof
theMacaugovernment.Wevebeenassuredinwritingfor400tablestostartwith
andtheirassurancesofreviewingtablesaswegooverthenextcoupleofyears
ourexpectationandourlendersthatwewillopenwithenoughtablesin5&6to
justifythenumbersthatweprojectedintheloandocuments.Thatwillinvolve
movingsometablesfromsomeofourfacilitiesaswellastheadditionsofsome
electronicgames.
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JoeGreffJPMorgan:Justtoclarifythatthe400thatyouhavebeenassuredin
writing
MichaelA.LevenPresidentandCOO:Thatiscorrect.
JoeGreffJPMorgan:thatisinclusiveoftablegamesthatyouwouldmovefrom
otherproperties?
MichaelA.LevenPresidentandCOO:No.400newtablesplus2,200slotswe
haveassurancefromthegovernmentandwereceivedthatassuranceandthe
assurancethattheywillworkwithustogetadditionaltablesbythelatestinMarch
of2013.Butifthatdoesnthappen,wewillstillopen.Wewillmovesometables
thatwearenotusingintheotherfacilitiesaswellasaddelectronicgames.Sothe
numbersthatweprojectedarethenumbersthatareintheloandocumentsand
havebeenapprovedbythebanks.
SheldonG.AdelsonChairmanandCEO:IdliketoaddonthatandsayIbelieve
thenumberisapproximately170tablesthatweregoingtomovethateitherare
notbeingusedrightnoworthatarewhatusedtobemarginalgamesthatare
beingusedatlowerrates.Weareadding100electronictablegames,whichoffer
someverygoodpotential.Weregoingtotrydifferentelectronictablegames.We
arealsoassuredbythegovernmentwevebeenassuredthatwellhavethe270
extragamesthatweoriginalputinourplansin2013.Sowelloperatefortwoor
threeyearswithoutwell,wellstilloperatewiththatnumberoftables,butwell
beabletogetanother270.Thatisbeforewestarttomakeadjustmentslikewe
aremakinginSingapore,wemakewithallnewproperties.Increasingor
decreasingthenumberoftablesanddenominationsasweopenthepropertyand
weseethedemographicsofthevisitation.
JoeGreffJPMorgan:AndthenwithrespecttoMarinaBaySands,Sheldon,Iwas
hopingyoucansharewithus,Iknowitsbeenonly10days,anyrevenuemetrics
attheproperty,whetheritsoneperslotperdayorslotrevenueperdayormass
revenueperday.Itwouldbenicehearingwhatthosenumbersarerelativetoother
numbersthatwemightbehearingfromyourcompetitors?
SheldonG.AdelsonChairmanandCEO:Letsputitthisway.Noneofthe
analystshavecomeupfirstofall,wedonthaveonethingwearesureofthat
ittakeslongtimetoorderastadiumstyleelectronictablegamesthatseemto
havegonegangbustersinGentings(indiscernible)IcallitGenting,otherpeople
callitRWS.Theyarecompletelyfullandweveorderedthemandthesehavetobe
madecustom,butweexpecttheminfourtosixweeks.Sothatwillmakeabig
difference.However,thelowestnumberperdaythatweveexperiencedishigher
thanthemaximumnumberthatanyofthemanyanalystshavebeenestimating.
TheestimatesthatweveseeninthemarketaresimilartoLasVegasnumbers,
$200plusorsomeothernumbersaroundthecountry.Butwehaveranged
dependsuponthedayanddependsuponwhichmachineshavebeenopened,
becauseinthefewfirstfewdays,thewhattheycallthem,surveillance
requirementsarereally,reallyveryparticular,verymeticulous,very
perfectionists.Whatwevelearned,Illgiveyouarangefrom$400to$900perunit
perdayandIdontthinkanyoneanalystcameoutwithourlowestnumberof
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$400.SoIthinkwellhaveasomewhathigheraveragewhenwebringinthose
electronictableroulettegames.Itsobviousattheroulettegamesweget8turns
anhour,8to10turnsanhouroutoftheroulettegames,theliveroulettegames.
AndtheETG,theelectronictablegamestorouletteare80gamesanhour,andits
unbelievablecashcows.
JoeGreffJPMorgan:Rob,Ialmostdidntrecognizeyouactuallynotsoundingso
negativeonLasVegas.YourcommentsabouttheFITratesontheweekends,can
youexplain,whydoyouthinkthatis?Isthatjustdemandcomingback,and
therefore,youandothersonthestripareyieldmanagingappropriatelyorisitjust
arationalizationofhowtheoperatorsarelookingatchargingroomrates?
SheldonG.AdelsonChairmanandCEO:Beforeyouranswer,Joe,Ijustwantto
saywearoundherecompletelyagreewithyou.Wedontknowifweretalkingof
RobGoldsteintheneworRobGoldsteintheold.Hisbirthdayistomorrow.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:MybirthdayisSunday.
SheldonG.AdelsonChairmanandCEO:Sunday.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Yeah.
SheldonG.AdelsonChairmanandCEO:SoheistheolderlongtermGoldstein.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Iamgettingoldandtough.Theresbeenanice
SheldonG.AdelsonChairmanandCEO:Howoptimistic.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Theresbeenanicemovement,Joe,intheweekends.Tobeclear,though,
itsnotacrosstheboard.ItsbeenespeciallyintheFITleisuresegment,hasshown
somerelativestrengthinthelastmonth.Aprilwasverygoodfortheentire
industry.IthinkthatMayisholdingupthattrend.AndIdontknowhowtoattribute
towhat,butIthinkthereissomeconfidencebuildingamongourcompetitorsand
certainlyinthishotelthatweareseeingweekendrentratesandleisurearetrading
up.Itsnicetosee.Groupdemand,aswevesaidinpreviouscalls,continuestobe
strong.Unfortunately,pricingdoesntseemtoaccompanythatdemand.SoIwould
lovetoseeourgroupbusinessgetbackupinthehigherranges,butwhatis
happening,clearly,lastweekendallofAprilwasvery,veryencouraging,onthe
weekendsintheleisuresegment,andIamhopingitbodeswellforthesummer
becausealotoffolksintownareveryconcernedthissummerandtheyshouldbe,
buttheresbeeninthelastfourtosixweeksanicetrendupwards.
SheldonG.AdelsonChairmanandCEO:Couldwesaythenumber?Ithink
wevebeenaveragingonweekendsbetween240and260.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Lastweekend262.Wehadniceandlotsofitjustlookgood.Itsbeena
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recenttrendnow,Joe.IthinkyousawtheMGMnumberthismorningandIthink
youknowwhatshappeningintown.Thefirstquarterwasnotthatstrong.AndI
thinkwegotwaystogoinLasVegas,butImalittlemoreoptimisticthanIhave
beeninlastsixmonthsbecauseIdoseesomepositiveleisuretrends.Andclearly,
demandonthegroupsideisverystrong,buttherateshaventbeenasstrong.
Operator:JanetBrashear,(SanfordC.Bernstein).
JanetBrashearSanfordC.Bernstein:Iwantedtoaskaboutlots5&6in
Macau.Weveheardstoriesoflaborralliesagainstforeignlaborandpotential
requirementthatyouhaveonelocalworkerforeverynonlocalworkerandcost
escalationsduetolaborshortage.Andyouhaveafewthousandpeopleonsite
now,buttypicallywouldhavemorelike10,000togetaprojectofthissizedone.
Whatareyouhearingfromthegovernmentaboutyourabilitytobringinmore
workersandwhatdoesthatmeanforyourtimetableandyourcostprojection?
MichaelA.LevenPresidentandCOO:WehadameetinglastFridayinMacau.
Wehadaverygoodmeeting.Andtheindicationswegotwerethatthereissome
levelsoflowtheresaverylowleveluponemploymentinMacau.Weactually
haveabout,Ithink,3,900workersonthesitenowandtheindicationswegotas
weleftthemeetingisthatweshouldntbeworryingaboutwhetherornotwellbe
abletohavethebluecardsforworkers.Butwehavetoabsorbsomeofthosenon
employedworkersinMacau,whichwerewillingtodo,andwedontexpecteither
usandIcantspeakforGalaxywhoisgoingtohavethesamesituation,about
havingaproblemthere.Wefeelveryconfidentwellhavetheworkerstofinishthe
project.
JanetBrashearSanfordC.Bernstein:Willyouhavethemonaquicksigning?
Soifyoudowhatyourpartiswhichisabsorbingthenonemployedworkers,is
thataprocessyoucanworkthroughquicklysothatyoucangetyourbluecards
expeditiously?
MichaelA.LevenPresidentandCOO:Yeah,webelieveso,Janet.Ithinkthat
itsintheinterestofMacauandthegovernmentandthecitizenstherethatwellbe
successfulandgetdone.Andatthispoint,therewillbesometimethatwehaveto
executecertainconstructioncontracts,whichwillprobablylastthreeorfour
monthsbeforewegetfullyoperational.Thereareworkersavailableoutsideof
Macau,obviously,forthat.Andatthispoint,candidly,wedontexpecttohavea
problem.Wewillgothroughtheprocess,wellworkthroughtheprocessandwe
expectthatwewillbeokay.
JanetBrashearSanfordC.Bernstein:IfweswitchtoSingapore,whatwasyour
bigsurpriseinopeningSingapore?
MichaelA.LevenPresidentandCOO:ThebiggestsurpriseinSingapore.
JanetBrashearSanfordC.Bernstein:Yes.
MichaelA.LevenPresidentandCOO:Youaretalkingaboutthebiggestsurprise
inthefirstweekofopening?
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JanetBrashearSanfordC.Bernstein:Yes.
MichaelA.LevenPresidentandCOO:Itsatoughquestion.IthinkthatIllhave
tosay,fromacasinostandpoint,IthinkthebiggestsurpriseistheVIPpremium,
thedirectpremiumbusiness,thecreditbusinesstheamountofcreditapplications,
andtheactivityinourcasinoresults,whichindicatearoughlyaround50%coming
fromthatparticularsegmentrightofftheback.Ithinkthatwasabigsurpriseto
me.Ithinktheothersurprisewasthathowwellthecasinowasacceptedinthe
communityintermsofitspositioningvisvisthecompetitor.Allthepressandall
thesupportliftedittoadifferentlevel.Andinthemassplay,thenonslotmass
playwassurprisinglygood.Ithoughttheslotplaywouldbewhatitis,butIdidnt
knowthatthemassplaywouldholdonthetables.Thewaywesetthefloorup,we
setitupsothatwewouldhaveenoughtablestoaccommodateeverybodywho
came.Soatsomepointstherewereemptytablesorveryslowplayatsome
tables,buttherewerenolines,nopushing,noshoving,nocrowdthatoccurredin
theotherenvironment,andthatwasintentionallydone.So,Iwassurprisedhow
wellthatworked.Wehadnolines,nodifficulties,etcetera.Onthenegativeside,I
thinkweweresurprisedthathowmuchsurveillanceactivitywehadtodointhe
lastminutetogettablesopen,theamountofcamerasbeingadded.Andso,asa
consequence,wedidntopensomeoftheVIProoms.Onlygotabouthalfofour
tablesopenedinthePaizaarea,andthatwasalittlebitofasurprise.Wethought
wewereokaythatway,butinthelastofcoupleofweeksitwentawayfromus.I
thinktheresortthatisbasicallyeventhough50%oftheGFAspaceisopen,only
reallyabout20%to25%to30%ofthetotalresortisopenandIthinkwewere
surprisedathowwellitwasacceptedbythecommunity.
JanetBrashearSanfordC.Bernstein:Yousaidthatthelocalcrowdwasless
thanwasalowpercentage.Canyougiveussomeideaofhowlowandwasit
lowerthanyouexpectedand
SheldonG.AdelsonChairmanandCEO:No,onethird,twothirds
approximately.
MichaelA.LevenPresidentandCOO:Inthefirstnumberofdaysinthecasino
wehadforeignersabout66%andabout33%Singaporean.
KennethJ.KaySVPandCFO:Foracoupleofdays,itwaseven5050,butmost
ifyoulookedatthewholeoverthecourseofeightdays,itwasupthere
manymoreforeigners,Malaysia,IndonesiaandforeignersfromSingaporeprimary
markets,whichweexpected,andtheSingaporemarketaboutonethirds40%
maybeatthemostofSingaporeans.
SheldonG.AdelsonChairmanandCEO:Thereis36,000otherroomsin
Singapore.Andtheyenjoyveryhighoccupancyrate80stypicallynethigh80s.
Andthereisalotofopportunitiesforforeignerstocomeinthatvisitationtothe
otherhotelswerejustgoingtotrytosetupshuttlebusesbetweensomeofthe
biggerhotelsiftheywillallowustodoit.Thereisgoodnewsandbadnewsonthe
openingday.Thegoodnewsiswehadanawfullotofpeople.Thegoodnews
well,Ishouldntsaythegoodnewsorbadnews.Thesecondpartofthegoodnews
isthatpeoplelookedatitandsaid,well,therewerentalotofcrowds,there
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werentlonglinesthattherewasatGenting,butohgod,didtheyhavealotof
people.Well,Gentingdidnthaveahuge1.25millionsquarefootconventioncenter
towarehousethepeoplein.Sowhatwedidissetupthetheydidnthaveanyair
conditionedspacetoputthemin.Soweturnedtheaironintheconventioncenter.
Weputinthousandsofchairs.Weputinfoodservice.Weputincounterswhere
theycouldpaytheSingaporeanscouldpaytheir$100entryfee.Therealbad
newswasthatwewerentallowedtoadvertisethatweweregoingtobeopen.But
peoplejustknewandtherumorhadgonearoundthatweweregoingtoopenon
the27.Wewerentabletoadvertiseittillthe27untilmostpeoplealreadywentto
work.So,thenweletthepeopleinanorderlybasis,straightlinewithextensions
andropesandveryorderly.Sowehavethousandsofpeoplewaiting,butIguess
thejournalistsdidntknowthattheywereinthere,theywerejustshootingpictures
ofthepeoplethatwereonaveryorderlybasiscomingintothecasinofromthe
conventioncenter.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Janet,weshouldhaveIthinkallofuswerethere,theonethingabout
thebuildingweshouldsayitsastunningbuilding,iconic,itsbeautiful.AndIthink
everyonewhowenttotheopeningwas,Ithink,very,veryimpressedbothtourists
andbusiness(indiscernible)isanamazingiconicbuilding.Infact,ifyouareeverin
thatregion,youhavetoseeit.
Operator:MarkStrawn,(MorganStanley).
MarkStrawnMorganStanley:Twoquickquestions.FirstquestiononSingapore,
Iknowitsearly,butgiventhestrengthintheslotmarketthatyouareseeingso
far,doyouguyshaveanythoughtsonreconfiguringthefloorandmaybeincluding
moreslotsandpullingtable?Andifyouaretodoso,wouldtherebeanylaboror
CRAissuesindoingso?AndthenIhaveaquickfollowuponMacau.
MichaelA.LevenPresidentandCOO:Mark,letmejustgiveyouthisanswer.
Wereinthereeightdays,andalthoughthereweresubsetsofurgencytogetthe
stadiumelectronicslotsin,atthispointitsreallytooearlytotellwhatthe
movementswillbeandweknowwehavetomakesomechangesinthefloor.But
itsgoingtotakeanotherweekortwobeforewefindsomeveryIamonmyway
therenextweekalso.Soitsgoingtotakealittlewhiletogetexactlytherightmix
ofbusinessandthatsgoingtobeeverchanging.Sotheonlyreallysurethingnow
iswehaveorderedtheelectronicstadiumseatinggames,andourmixofBaccarat
toothertablesisbeinglookedatverycarefully.Thesizeofthecasinoalotof
thetrafficiscomingintothesidesandnotmovingtowardsthemiddle.Andso,
thereisanumberofthingswerelookingatwhichyoullfindasyougo.Sothe
answertoyourquestionis,yes,therewillbemovement,therewillbechanges.
Andontheotherside,onthelaborsidewiththeCRA,itsaprettyfree
environmentforustodowhatwewanttodoaslongasthesurveillance
requirementsaretakencareoff.Butfromatablesidestandpoint,itdoesntreally
theywontaffectusintermsofstaffing.
MarkStrawnMorganStanley:OnMacau,justlookingatthemassperformance,
whileitscertainlyimpressiveifyoulookatitsequentially,volumeshavebeen
relativelyflat.Doyouguyshaveplansinplace,whethermarketingorotherwise,
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totrytostimulatevolumessomewhatinthemarket?
MichaelA.LevenPresidentandCOO:AlotoftheemphasisinMacaubythe
individualsinchargenowhasbeenontryingtobuildtheVIPdirectmarketwithour
owncredit.Wearedoingalotofthat.Itsgrowing,asImentionedinthecall.I
thinkitwas21%ofourbusinessinthequarter.Thatwillhelpus.Butwiththat
strategyaswellasourstrategyintermsofMICEbusinessandthetourandtravel
businessthatwevebeenworkingandgettinggoodresultson,thatdoesntbuildthe
samekindofrevenue,asyouknow,ofthejunketrollingrevenue.Thatdominates
therevenueperspectiveofMacau.SoIcanttellyouthatourrevenuewillhave
sequentiallytheamountofgrowth,butIfeelveryconfidentthatourEBITDAwill
continuetogrowexponentiallyasweproducethatkindofbusiness.Wehaveno
realplanstobuildajunketleveltraffic.Asweveheldtothe1.25also,weve
potentiallylostorhavebeenimpactedbysomeofthepeninsulapropertiesthat
givebetterrates.Sowevetakenanotherapproachtoit.Idontknowifthat
answersyourquestion.
MarkStrawnMorganStanley:Thatshelpful.Onequickfollowup,haveyou
seenanyimpactfromCityofDreamsacrossthestreetbeenanymorepromotional
andhaveyoufelttheneedtomatchthatatallorthathadnotbeennecessaryat
thispoint?
MichaelA.LevenPresidentandCOO:Toourknowledgeherewehavent
matchedit.IhavenotheardanythingfromSteveJacobsandthepeopleoverthere
thatCityofDreamshasbeenchangingtheir1.25rate.ThechangesthatIhear
youretalkingaboutinthemassmarket.
MarkStrawnMorganStanley:Yeah,moreonthemassside.
MichaelA.LevenPresidentandCOO:Theyvedonesomethingsonmass.
Theyvedonesomepromotionandsomeadvertising.Wearedoingsomethingsin
otherareasnow,promotingbusiness.Wevebeenprettysuccessfulatitsofar.But
youdontreallyseethatunlessyouactuallylookat,particularlyinTheVenetian
andtheFourSeasonsathowmanyroomsarebeingsoldeverynighttothenon
VIP,thenonjunketplay.Andweresellingaboutatleasttwothirdsofourrooms
ormoreatTheVenetianonapaidcustomerbasisnow.Thatsabigindicator.I
dontknowwhatCityofDreamsisdoing,butmyguessisitsnotnearlyasmuch
asthat.
Operator:ShaunKelley,(BankofAmericaSecuritiesMerrillLynch).
ShaunKelleyBankofAmericaSecuritiesMerrillLynch:Justwonderinggoing
backtoSingaporeforasecondifwecangetalittlebitmorecolorontheVIP
versusmassmix.Ithinkyoudmentionedjustbrieflythatabout50%ofthe
businesswascomingfromVIP.Isthatcorrect?
KennethJ.KaySVPandCFO:Thatiscorrect.Ithinktheactualnumberforeight
daysis48%oftherevenuefromVIP.
ShaunKelleyBankofAmericaSecuritiesMerrillLynch:Andjustwhereareyou
atrightnowintermsofthetablesthatareupandrunning,giventhesurveillance
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issues,howmanyVIPandmassmarkettablesareyouatandwhereareyou
headedoverthenext?
KennethJ.KaySVPandCFO:Weareat70VIP,440
SheldonG.AdelsonChairmanandCEO:Outof139.
KennethJ.KaySVPandCFO:Outof139.Wehave442outof559andwehave
1,450slotsoutof1,642slots.
ShaunKelleyBankofAmericaSecuritiesMerrillLynch:Andthen,Mike,weve
talkedbeforealittlebitaboutthecommissionandrebatestructure,obviouslyyou
arenotusingjunketstoday.Isthatrightnowinlinewithyourexpectation?How
shouldwethinkabouttherebatesthatarebeingdemandedinthemarketright
now?
MichaelA.LevenPresidentandCOO:Robcanspeaktothat,Ithink,butletme
justwevealwayssaidandcontinuetosayonthejunketsidethatifthereare
junketsthatarelicensedbySingaporewewilldobusinesswiththem.Wedont
expectthattobemany,buttherewillbeafew.Onthecommissionrateside,we
basicallyourstrategyonthecommissionratesideontheprivatefortheVIP
privateplay,wepositionedourselvesmuchbelowthecompetitorinSingapore.We
havenothadpressuretomovethoseratessofar.Andthereasonfordoingthat
wasthatwethoughtthatwewouldimpactRWSsVIPbusiness,andifwecompete
adollarfordollaronthecommissionrateandtheylostthebusinesstous,then
theywillstartmovingthecommissionrateupagain.Sowevepositionedourselves
loweroncommissionrate.AndIcanttellyouwhattheaverageisbecauseI
haventreallylookedatitintheeightdays,butitisbelowwhatthecompetitorhas
publishedastheircommissionrates.Andsofarwerenotbudgingonitbecause
weredoingokay.
SheldonG.AdelsonChairmanandCEO:Therampupofthehighendisgoing
well,butitisrampingup.Wearegettingcustomersfromplacesthatwedidnt
considerinourprioritycountries.Welookatthebreakdownoftheappsforthe
credit,andwefinditcomingfromthemainthreeareasSingapore,Malaysiaand
Indonesia.Andtherearelotsofveryhighrollers,substantiallyhigheratleastthe
numbersIhaveseen,substantiallyhigherthanwehaveexperiencedhereLas
Vegas.Wedontgetalotof$10million,$12millioncreditplayershere,although
wedogetsome,butthereisalotofthisthereismorethanwhatIexpected.So
werestillrampingup.Particularlythefirstnightthatweopenedwehadsome
surveillancetableissuesandwecouldntopenallthetables.Idliketopointout
somethingthatnobodyhasreallyasked,ourgamingtable.Ourgamingtablewin
perunitisveryencouraging.Itsdifficultformetogiveyoutheexactnumbers.
Butletsputitthisway,whenIdidsomeestimatesofwhatwewoulddo,andI
screenthemextensively,thenumberthatIcameupwithnow,adjustedbased
uponthetablesthatarenotopenbecauseforvariousreasons,mostlysurveillance,
thenumberiscominginathigherthanwhatIoriginallyestimatedtocomeupwith
ouroverallEBITDAnumber.Soweareveryencouragedaboutthehighend.Ithink
agoodpartofthatrelatestothefactthatwehaveahigherqualityvisitor
comparedtoGenting.Peoplesaytheyhavealotoftheconstructionworkers.I
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personallywasntabletogetthereforthefewdaysthatIwasthere,but
everybodyelsehasbeenthere.Andso,thewordthatcomestomeistheyhave
domestichelperandconstructionworkersalotofBangladeshis.Andweseemto
havejusteyeballingitmyself,weseemtohaveahigherqualityofperson,
mostlyitwouldappeartobemiddleclasslowertouppermiddleclasspeople.
ShaunKelleyBankofAmericaSecuritiesMerrillLynch:Andjustonelastone
onthatnumber,Sheldon,justtobeclearyouaretalkingaboutthe1billionto1.25
billionestimatethatsbeenputoutinthemarketpreviously?
SheldonG.AdelsonChairmanandCEO:Wehaventgivenanyguidance.We
havedebated.Wehavedebatedandwesaidwecameupwithcertainfiguresthat
wereinexcessof1billionandnobodygotthere.Butwearelookingatnumbers
andmetricsthatareonarampandthatseemtogoverywell.Wecanestimate.
Webelievethatthefinalnumbersaftertherampupperiodandona12month
basiswillbeaheckofalotcloser,ifnotequaltoormaybeevenexceedingour
numberthatweexpectedthenandtheaverageoftheconsensusofallthe
analyststogetheratasubstantiallylowernumber.Mostoftheanalystsare
estimating,say,slotsasanexample,atthenormalU.S.typeofslotnumbers,but
theslotnumbersofthe200range.Slotnumbersareoverthere.Iamsureyouve
heardaboutGentingandourslotnumbers.Ihavetoldyouwhattheywereon
differentdays.Andwestilldontwehaventmaximizedthemostdesirable
games.Wehavetodothefinetuningofboththetablegamesanddenominations
andtheslotsindenomination.Bytheway,theelectronictablegamesoverthere
areconsideredslotsslotunits,whichwillgoupto2,500.Andwebelievethatthe
slotreturnissogoodandsopromisingforthefuturethatweregoingtowere
seriouslyconsideringputtinginasmanyasthemaximumthatwecaninthenear
future2,500.
Operator:RobinFarley,(UBS).
RobinFarleyUBS:Iwonderifyoucouldhelpusquantifyalittlebittheimpactof
luckinthequarter.Iknowthatyousaidyourrangesfornormalholdaregoingto
change,butbasedontherangesthatyoutalkedaboutbeforethequarter,ifyou
couldhelpusquantifybecausesomeofthefactorsarentinthereleasethatwould
impactit,likewhethertheplaycameinunderwhat(indiscernible),soifyou
couldhelpusquantifythatforbothVegasandMacau?Andthen,alsoaquestionon
Singapore,intermsofthestickinessofthatlocalplay,aremostofthelocal
visitorspayingaonetimefeeorareyougettingsomesigningupfortheannual
membership,justtryingtothinkabouthowlongtermorhowstickythatlocal
visitationis?
SheldonG.AdelsonChairmanandCEO:Actually,Idontthinkwehavethat
information.Werefocusingontheotherside.Doesanybodyherehavethat
informationbychance?
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Whilewearesearchinginformation,IwilljustanswertheVegashold
issue.Ithinkournumberisdeadonandshouldbebecauseofourmix.Obviously,
wehadaboutU.S.$547millioninLasVegas.About50%ofthedropcameoutof
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ourAsianBaccarat,ChineseNewYearsweek,coupleofweeks.Andsowedidnt
playlucky,weplayedwhatweshouldhaveplay,whichisweheldverywell.Our
historicalisinthehigh20s.Itwasactuallyheldinthelow30s.Butbalancingthat,
theotherhalfofthedropcameoutofournonBaccaratmoretypicalU.S.
customer.Weheldverypoorly,about13%.Weblendedattherateyouseeonthe
stat.weblended234.ButifyoureallylookatIdontthinkweheldhighatall,
butIthinkweheldthatdeadonweshouldbebecausetheBaccaratbusinessfor
the10yearswevebeendoingthisweveheld28%,29%againstbillionsofdollars
todrop.IthinkitsreflectiveoftheBaccaratmarket.TheAsianplaywas
disappointingbecauseweheld5pointsunderthenormonthebalanceofthedrop.
SoIdontthinkinLasVegasresultsbecauseofthemixwouldbeconsidered,234
wouldbeconsideredhigheratthat.Ithinkitswhereitshouldbe.Perhapsyoucan
talkaboutMacau.
SheldonG.AdelsonChairmanandCEO:Wehavetriedtoskirtthisissue.Well
trytofindawaytoneutralizethatwilllevelitoutonthehold.SoIcameupwith
theideathatweshouldtakea200day100,200dayortwoorfourquarter
movingaverage.Soweputtogethersomeofthefigures,andthemovingaverage,
say,ontherollanddoyouhavethefiguresinfrontofyou,Kenthemoving
averageontheroll,Ibelieve,wasexactly2.84%overfourquarters.2.84%,you
cantgetanymoreaccuratethanthat.Wecouldhavecome1basispointhigherat
2.85%.ButIthink2.84%isaverygoodmovingaverage.Yougottoremember.
So,everytimewecameoverthelownumbernobodywantstoadjustthatupwards
becausewehadlowerthannormalnumber.Andeverybodywantstoreduceour
performancedown,whenwecomewithahighnumbers.So,Ithinktheaverage
numbershouldbe,whatitshouldbe,whattheaverageisoverthelongthe
longertheperiodthegreaterthelawofaverageisassuredlykicksin.Ken,doyou
wanttomakesomecommentaboutthat?
KennethJ.KaySVPandCFO:Well,breakingitupbetweentherollingandthe
nonrolling.Ontherollingside,Sheldonisexactlyright,intermsoftheaverage,
whichisthe2.84,2.85.Ifyoulookattheactualnumbersforthefirstquarter,we
wereunluckyifyougobyabout$5millionontherole.Anditsalittlecomplicated
becauseyouhavetolookatitonthevolumebaseandwinbase.Andthevolume
basewasmorefromanoverallkindofrevenueperspectiveandwewereunlucky,
ifyouwill,fromthatstandpointandalittlebitluckyonthewinside.So,whenyou
marrythetwotogetherbecausethevolumebaseiswiththehigherpercentageof
theoverallrevenuestream.Ournetholdimpactwasanunfavorable5million.So,
youbasicallyhavetoaddabout$5milliontoourperformanceforthat.Onthenon
rollingside,ifyoucompareittothemovingaverages,wewerealittlebit
favorablefromthatperspective.But,nonetheless,youhavetolookatitfromthe
standpointofwethinkthattheactualperformancethatweachievedinthefirst
quarterconsistentwithwherethebusinesshasbeenperformingoverthelastfour
quarters,andfallingwithinthatrange.So,ifyouconsiderthatouractualfirst
quarter2010performancewaswithintherangeofperformancethatweveseenon
thenonrollingbusinessforeachoneofthepropertiesinessencetheredbeno
adjustmentforthenonrollingbusiness.Now,ifyoucompareittojustasingledata
pointwhichwouldbethemovingaveragethenwewouldhavebeenfavorableby
approximatelyaround$10millionorso.So,whenyoumarrythetwotogether
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meaningrollingandthenonrollingwearefavorableintotalbyabout$5million.
RobinFarleyUBS:Andthenjustlastquestion.Canyoubreakoutwhatyour
casinoreceivablesareandforbothregions?
KennethJ.KaySVPandCFO:Whatwasthat?
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Receivables.
KennethJ.KaySVPandCFO:Yeah,justonesecond.Well,ourcasino
receivablesforLasVegasonanetbasisitsabout$118millionandforMacauits
about$190million.
RobinFarleyUBS:Anddoyouhaveinfrontofyouwhatpercentreservedthat
is?
KennethJ.KaySVPandCFO:Yeah,soinVegaswereabout31%reservedbut
wehavetolookatitbetweenbreakupbetweenjunketsandnonjunkets.Overall
itsabout23%versusthenonjunketbusinessitsabout39%reserved.
Operator:FeliciaHendrix,(BarclaysCapital).
FeliciaHendrixBarclaysCapital:So,SheldononSingaporeinyourprepared
remarksIthoughtthatyouhadsaidhavesomethingtothetuneofyourgenerating
45%to50%profit.DidIhearthatright?
SheldonG.AdelsonChairmanandCEO:Youheardthattherangeofthe
departmentalprofitsofthecasino,whichwedoeveryday.Differentdays,
dependingupontheamountcameinbetween45and60maybeitsgiveortake45,
maybe43,maybe47.ButthehighestIwouldtellwas60.Ikeepsayingthatwe
pickup24%ofthetaxesaloneversusMacao.Wepickup24%.Andalthoughwe
dogiveawayfrom0.75to1.0totheplayersdirect,wesaveatleast25basis
points.Well,theaverageisprobablysomewherebetween0.75and1.0sofarat
thehighend.So,wearepickingup24bps24pointsontaxes.So,thatsatough
explanation.Wepickupprobablyanother11%or12%onthesavingsvisvisto
(tacklereps).AndbythewayMikesaid,andIdliketoputlittlemorecolortothat,
saidthattherewillprobablybesomejunketreps.Now,therearejunketrepsand
theyarejunketreps.LetscalculatetheMacaostyledjunketrepsandthentheLas
Vegasstyledjunketreps.LasVegasstyledjunketrepsarereallyfieldsalespeople
thatsendcustomersin,forwhichtheygetpaidabasisoftheoreticalwinwitha
cap.Andsomeofthehigherendplayersthatpeoplesendintheymakeabout
$8,000to$10,000thefieldsalespeople,thejunketrepsinthefield.Buttheyboth
unfortunatelycalledthesamething.AndthereistheMacaostyledjunketrepsthat
notonlydeliverthecustomertheyprovidethecreditandcollectionandthey
providethecash.So,IdontbelievethereisgoingtobealotoftheMacaostyle
junketrepsapprovedbecauseIhavetalkedtoacoupleofthemmyself,theonly
coupleIveevertalkedto.Andtheysaytheycertainlydontwanttogiveoutthe
information.Theyareveryprivatepeopleandtheyhavetheydealinalotof
cash.Andtheyllneversubmitthatkindofinformation.So,Iamverypessimistic
thatanyoftheMacaostylejunketrepswillbeapprovedorwillIdoitorwillnot
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approvedforinadequateinformationinSingapore.Nowtheremaybesomefield
salespeopletypeofjunketrepslikeyouseeinLasVegasthatmightbeapproved.
FeliciaHendrixBarclaysCapital:Sothisrangewhichisimpressivetobegin
withiswithinyourfirsteightdays.Assumingthatlikeothernewcasinosyoumight
notbeasefficient.Couldweseethisrangeshifthigher?
SheldonG.AdelsonChairmanandCEO:Well,youhavecertainlyfixed
expenses,soIdontknowhowmuchhighyoucanget.Ithasbeenourhighest
rangeofestimatewasinthe60s.ButIdontknowhowitcangetmuchhigherthan
that,becausewehavecertainfixedcharges.
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Itreallydependsonthemix.Wearedoingthreeverydiversesegmentsof
thissofarthespotbusinessisoneterrificsegmentthusfar.Sheldonmight
(addressthis).Themasstablemarketsofarhasbeenveryexcitingtous.Aswe
mentionedthepremium,reallydependsonsegmentsyouarein,becauseobviously
themostdifficultsegmentmarginwiseisgoingtobethepremium.Right,because
youarediscountinganddoingotherthingsyouarerolling,soyougotexpense
againstthat.Aslongasour(volume)mixwearedoingverywellinallthree
segments.Butdependsonthemixhowstrongthemargingets,becauseobviously
thespotmachinejustexampleon$400millionor$500millionofslotrevenueyour
marginsaregoingtobeextraordinaryfarbeyond45%.Itreallydependsonyour
mixandifyoumixthemasstablesendsupbeing$5to$10millionthatcouldbe
extraordinary(volumesaslabor)andnominalcomplementary,soreallydepends
onthemixofyourrevenues.Themostdifficult,itwouldbeobviouslythepremium
segment.ButIthinkitreallydepends,whatSheldonwasreferencingthusfar.And
allthreesegmentsareverystrong.So,itdependswhichsegmentperformsthe
bestastowhattheeventualmarginwouldbe.
FeliciaHendrixBarclaysCapital:Juststayingonthemargintopic,ifwecould
movetoLasVegasforaminute,Rob.Inthisquarteryouguysobviouslysawanice
benefitfromstrongbaccaratplay,whichhelpedmargins.Butwhenwethinkabout
Iknowyouregettingalittlemoreoptimistic,butwhenwethinkabouthowyou
shouldlookforIdontknowthenextyearorso.Isthisthemarginbaseyouare
comfortablewithorshouldwewhenwegoforwardandmodeltakeinto
considerationthatmaybeyouhadjustextragoodbaccaratplaythisquarter?
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Well,letsbecandid.Noonecanrefutethefactwehadexceptionalour
LasVegasbasedsalesteamfortheAsianbusinessIthinkisextraordinaryandthey
areprovingitrightnowinSingaporeandtheyareprovinginLasVegas.However,
unfortunately,wecantfigureoutawaytogetChinesetocomeeveryquarterlike
wewanttomakeChineseyearseverymonthwehaventfiguredthatoutyet.So,
letsbeclearthatwedropped$550millionandhold37%thatsaprettygood
thingright.ButwhatIthinkismostexcitingforVenetiantoLasVegasisthisis
whatSheldonprophesiedadecadeagointermsofthegroupconnectionbusiness
stillholdstrueandasthemarketreturns,keepinmind,somethingIalwaystell
peoplewhichisevery$10ofADRcancontribute$20to$25millionofEBITDA.So,
Ithink,wearereallythefirstguytostepupandanticipateasatoptierproperty.
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Whenthecommissionsegmentmovesupandgroupsegmentappreciates$10lousy
ofADRtranslatesto$20million,$25millionofEBITDA,Idontwanttodependon
Asianhighrollersorevenforeigners.Thebasebusinesswereinisroomsandrate.
Andweneedratestomoveforustogetback.Wewanttobebacktosixand
seven.ButIthinkwhenitdoescometobe,wellbethefirstguytojumpinand
participatefromthatside.So,marginsarenotbeconsistentwhenyoureholding
whenyouhavethatkindofhandle.Obviously,thatdrivesourbusiness.Weare
veryproudofourslotwin.Wehadexceptionalslotresults,andagain,almost$50
millionoftopline.Butagain,whatdrivesLasVegasareroomrates,andrightnow
roomrateswillcontinuetobethedeciderofmargin,deciderofEBITDA.Ijustthink
whenthingsgetbetterandIhatetobeoverlyoptimistic,butitsbeenagood
coupleofthree,fourweeksofweekendstuff.AndreenteringADRsback$30,$40,
thisplacemakesawholebunchofmoney.
FeliciaHendrixBarclaysCapital:Andthenspeakingofthat,whenyoujustthink
about2011,youtouchedonthissomewhat,butwhatkindofratesareyoubooking
yourgroupbusinessatyetsofar?
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:Weretryingtostayabove$200.Insomegroupsweregettinghigherthan
that.Verycandidly,thatsourgoalistoexceed$200in11.Icantsaythatwere
thereyet.Wehavesomebusinesswith(indiscernible)thatgoesbacksixtoeight
months.Thisisaverycompetitivegroupmarket.Andunfortunately,somepeople
inthetownjustdontbelievethattheycancharge$250and$300.Webelieveif
somepeoplewouldstopdiscountingaggressive,thismarketcouldmovequickly.
Verysincerely,Ithinktheupsidetousissignificant.ItsmaterialtoourEBITDA.
Butforourgroupbusinesstomoveeverytimewetakeapieceofbusiness,wegot
toknockitdown$30,$40becausesomeoneelsehas(opened)witha1.70.Its
painful,butitsafactoflife,Ithinkthetownhastoregainitssealegs,itsbelief
thatitsagreatplacetovisit.Itsstupidlyinexpensive.Groupsareflockinghere
becausedespitesomecommentsonLasVegasearlier,LasVegasisthebestplace
intheworldthatyourgrouppeoplewhodonthaveagroupforameetinghereit
issilly.Theratesareridiculouslycheap.Ithinktheyregoingtotrendup
aggressivelywhenpeoplebelieveinthetown,andIhopeitsgoingtohappen
shortly.ButIthinkourratesfor11willbe,hopefully,above2,2.15,butthatsthe
bestIcanhopefornowfor11.
FeliciaHendrixBarclaysCapital:Andthenfinalquestion,Sheldon,howarethe
condosalesgoing?
SheldonG.AdelsonChairmanandCEO:Whatcondos?
FeliciaHendrixBarclaysCapital:Coops.Iamsorry,thecoops.
SheldonG.AdelsonChairmanandCEO:Wearejustinthethroesofgettingthe
finalokay.IndaysthelastemailIgotfromJacobsaidthat.Heexpectstheability
tomoveittotheseparatecorporationthatwevesetupandthathewould
immediatelystartselling.TheresponsibilityforthatwasmovedfromtheMinister
ofFinancetotheMinisterofPublicWorks.AndthelastemailIgotwaspositive,
wasoptimisticaboutourgettingokay.Andthesalesactivitythatcondothey
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donthavecoopoverthere,butthecondomarketinHongKong,asanexample,
wasverystrongandthecondomarketinShanghai,whichcausedtheChinese
Governmenttosay,well,wewanttocoolthishotmarketup,themarkethasbeen
hotenough.AndasMikehassaid,wearelookingforotherforeigners.Wearenot
lookingforMacauresidents.SteveJacobsthesalesdepartmentwaslookingat
1,500afootandItoldthemthatweshouldkeepouroriginaltargetof$1,750a
footandwerelookingatstrongmarketinbothKoreaandJapan.
Operator:(LarryKlatzkin).
LarryKlatzkin:Actuallymajorityofmyquestionshavebeenanswered.Iguess
onequestionwouldbe,asfarasSingaporegoes,areyouguysstillinthemodeof
rampingupthemallandwouldyoustillconsidersellingthatmallifyouare
allowedto?
SheldonG.AdelsonChairmanandCEO:Notyet.
KennethJ.KaySVPandCFO:Wecantsellitfor
SheldonG.AdelsonChairmanandCEO:No.Underthesaleofrealestate,we
cantsellitIthinkforsevenyears.However,Istillthinkwellgetalotmoreupin
thenextseveralmonths.Wellrampuptocompletion.Itshouldbecompletedby
theendoftheyear,butIwouldntevenconsiderituntilwefoundoutthatit
matured.Bymaturedmeaningthatithasgoneupsubstantially.Now,alotofthe
tenantsareinpercentagerents,whichgofrom12.5to18there,justlikeMacau.
AndIwouldntconsidersellingitnow.
LarryKlatzkin:So,onceyouhitOrchardStreetnumbersandpast,youwilllookat
whatyoucandowithit?
SheldonG.AdelsonChairmanandCEO:Wellhavetogrow,Larry,andthensee
whathappens.Ifweleveloffthegrowthorthegrowthratestopsifwefeelwere
gettingtowardsthemaximum,wegottoleavesomeroomforanybodywhobuysit
tohavesomegrowthinittoobesidesjustinflation.SoIwouldsayitsifIhadto
giveananswertoday,Iwouldsayitsprobablyatleasttwoyears,maybethree
away.
LarryKlatzkin:Monetizingthecashflowstream.Okay,thatsgood.Otherthan
that,Ithinkalltherestofmyquestionshavebeenanswered.So,congratulations
onagreatquarter.
SheldonG.AdelsonChairmanandCEO:Thankyou.AndIthinkonagoodrate,
Ithinkthatwellbeabletosellit.Atagoodcaprate,wellbeabletosellitand
havemoneytopayoffourdebt.
LarryKlatzkin:Thatwouldbefantastic.
SheldonG.AdelsonChairmanandCEO:Originallytheoriginalbudget,andif
wegetintopercentagerents,wellgetbacktotheoriginalbudget.Butalotofthe
leasesweresignedduringtheeconomictsunami,butwestillhavethepercentage
rents.Andiftheyhitwheretheoriginalbudgetwas,wellbeabletosellitandget
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backmostofourcosts.
LarryKlatzkin:Thatwouldbegreat,$1billionofcashflowandnodebt.
SheldonG.AdelsonChairmanandCEO:$1billion?Whosaidjust$1billion?
RobertG.GoldsteinEVPandPresident,TheVenetianandPalazzoLas
Vegas:ItsoundsLarry.
SheldonG.AdelsonChairmanandCEO:Isyouranalystorientationleakingout?
Arethereanyfurtherquestions?
Operator:Therearenofurtherquestions.
SheldonG.AdelsonChairmanandCEO:Okay.Thankyou,everybody.Itsbeen
agoodtime,exceptthatitfeltlikeSeptember18.Thestockmarkettodayfelt
morelikeSeptember18,08.ButImsureyoullallrespondpositivelytoour
business.Thankyou.
Operator:Thankyouforparticipatingintodaysconferencecall.Youmaynow
disconnect.
Copyright2014Morningstar,Inc.